South Africa

South Africa market overview

Despite not being a member of the OECD, South Africa has implemented many of the BEPS recommendations into the national tax system. This includes a raft of measures such as country-by-country reporting, new controlled foreign company rules, disclosure of aggressive tax planning and VAT reform.

As part of its ongoing commitment to BEPS, South Africa was one of a host of countries to sign the multilateral instrument on June 7 2017. This should ease the incorporation of new standards into existing bilateral treaties. In the meantime, South Africa is facing serious challenges. Not only is the economy lagging in growth, but unemployment remains at more than 25% and the country's credit rating has been downgraded to junk by two ratings agencies.

The level of economic disarray has been matched by political instability. The South African government has been wracked by a slew of scandals. This includes the sacking of finance ministers, Nhlanhla Nene and Pravin Gordhan, sparking a panic on the stock market with the rand taking a major blow to its value.

"The political environment in South Africa is unstable and we're on our fourth finance minister in four years and we're waiting on a new tax bill to come in," said Brian Dennehy, partner at Webber Wentzel. "Usually these things are structured so we know what is coming before it is implemented. We're in a unique situation where the finance minister behind the bill is no longer in office."

What this means for tax law in South Africa is a matter of speculation at this point. President Jacob Zuma's time in office is coming to an end in 2019, but a lot depends on who will succeed him. The African National Congress (ANC) is set to pick its presidential candidate in December 2017. So far Deputy President Cyril Ramaphosa and former Minister of Health Nkosazana Dlamini-Zuma have launched their respective campaigns for the nomination.

"I think it's a sensitive juncture in the South African context," said Bernard du Plessis, head of tax at ENSafrica, Taxand South Africa. "We've seen substantial increases in personal tax and a lot of turmoil and a lot of rhetoric around economic policies and rising state expenditure and concerns over how that will be curbed."

"The deficit is a big concern," du Plessis continued. "Indirect tax is an issue because it's the biggest space to plug some of these gaps, but raising VAT will not be popular because of the disproportionate impact on poor communities. Therefore, the space is extremely limited for solutions."

It is unlikely that the ANC will lose its majority. However, the Zuma administration has cost the ruling party a great deal of credibility. There are signs that the party's monopoly on office may be slipping. The party lost ground for the first time in the 2016 municipal elections in the midst of a dual challenge from the Democratic Alliance and the Economic Freedom Fighters.

In the summer of 2017, the South African Communist Party (SACP) declared it will contest elections on its own for the first time. This may mean the beginning of the end of the old alliance between the ANC and the SACP. It's unclear if a new president could reverse this situation. The factors of disillusionment within the ruling party's base and old allies, and the rise of two major opposition parties, may cost the ANC dearly in 2019.

Cliffe Dekker Hofmeyr's Tax and Exchange Control practice provides advice on a wide variety of corporate tax and indirect tax (including value added tax and customs and excise duty) matters, both in the local and international context. We provide tax planning as well as tax structuring and transaction related services. We are also actively involved in tax dispute resolution and we assist clients in resolving their disputes with the South African Revenue Service. A number of our clients' disputes have recently been heard in the Tax Court and the Supreme Court of Appeal. We also keep our clients informed of anticipated changes in tax laws and practice to help them manage and take advantage of developments on the tax front.

We work on tax matters on an individual basis, or as part of a team of lawyers from across our firm's practice areas in corporate transactions. We are therefore able to provide a commercially integrated service in order to ensure efficiency from inception to implementation. We are also actively involved in obtaining advanced tax and VAT rulings and also customs/excise tariff, valuation and origin determinations for clients and are able to move quickly and seamlessly on cross-border transactions. We coordinate information and resources to achieve your corporate objectives in the most tax efficient manner, wherever you do business.

A) The mining income of gold mining companies is taxed under a special formula, and the non-mining income of such companies is taxed at a rate of 28%. Special rules apply to life insurance companies, petroleum and gas producers and small business corporations.

B) Dividend withholding tax (DWT) was introduced, effective from April 1 2012. Previously, a tax known as the secondary tax on companies (STC) was levied at a rate of 10%. The DWT applies to dividends declared by South African-resident companies. Certain dividends are exempt from the withholding tax, such as dividends received by South African-resident companies and public benefit organizations. A decreased rate may apply under a double tax treaty.

C) Interest withholding tax at a rate of 15%, which took effect on March 1 2015, applies to non-residents only. Certain interest income is exempt from this withholding tax, such as interest with respect to government debt instruments, listed debt instruments and debt instruments owed by banks. A reduced rate may apply under a double tax treaty.

D) The 15% rate applies to royalties paid (or due and payable) on or after January 1 2015. This withholding tax applies to non-residents only. A reduced rate may apply under a double tax treaty.

E) Services withholding tax at a rate of 15%, which will take effect on January 1 2017, will apply only to payments made to non-residents with respect to South African-source services not otherwise subject to normal tax after taking into account tax treaties.

South African Revenue Service

The tax practice at Bowman Gilfillan is overseen by two heads of tax, Wally Horak in Cape Town and Barry Garven in Johannesburg. The firm offers a comprehensive range of tax services covering domestic and international tax, cross-border transactions, dispute resolution and tax litigation.

With offices in four African countries and more than 400 lawyers, the firm has the capacity to provide tax services across the region. A key contact is tax partner Alex Mathini, who is based at the Nairobi office, as part of the Kenyan tax team.

Director Emil Brincker is the head of the tax practice at Cliffe Dekker Hofmeyr. Held in high regard by clients and peers, Brincker has more than 25 years of experience in international tax, controversy, corporate tax and transfer pricing. Brincker works in tandem with Gerhard Badenhorst, who joined the firm in May 2017.

The tax team comprises 15 tax specialists, offering the full spectrum of tax services. Key focus areas include private equity, binding rulings, economic empowerment and policy development. The South African practice has negotiated settlements with SARS in major dispute cases, ranging from transfer pricing issues to mining tax and VAT. With offices across the African continent, the firm provides advice to domestic and international clients from major industries like mining, finance and retail.

Managing partner Nazrien Kader is the head of tax services at Deloitte. The tax department oversees tax services in 15 anglophone African countries. Kader is responsible for strategic and operational leadership of the tax executive.

The tax practice consists of 34 partners and 260 professionals, working closely with tax teams across Africa. The firm offers advice and assistance in all areas of tax, including bespoke solutions in areas such as business tax and cross-border transactions. The team provides fully automated solutions and insights with the use of data analytics.

Deloitte Africa has offices across the continent and the ability to serve clients in all African states. The firm has an unrivalled capability in service delivery across the region. The team has offices in Johannesburg, Pretoria, Cape Town, Stellenbosch and Durban, among others.

Members of Deloitte South Africa are active participants in key committees, such as the South African Institution of Tax Professionals and the South African Institute of Chartered Accountants.

Andrew Lewis is the director of tax at DLA Piper in South Africa. He advises clients on the full range of commercial and financial law with regards to corporate and international tax, including employment tax, indirect tax and dispute resolution. This remit covers advance tax rulings, corporate restructuring, voluntary disclosures and incentive schemes.

DLA Piper expanded to South Africa in 2015 with the opening of its office in Johannesburg. The Johannesburg practice takes on work across South Africa and sub-Saharan Africa, particularly in cross-border assignments, corporate M&A deals and other projects. The tax practice was established in 2017.

Bernard du Plessis and Peter Dachs head the tax team at ENSafrica, Taxand South Africa. The tax practice comprises 16 professionals with strong expertise in due diligence, property finance, investment management, transactions and restructuring. The firm offers clients advice on the complete spectrum of tax matters, from corporation tax to dispute resolution.

ENSafrica is the largest full-service law firm in Africa with more than 600 practitioners and offices in seven countries spanning the continent. The South African team liaises with the Treasury and the South African Revenue Service (SARS) on tax policy. Other distinguished partners at the firm include Beric Croome, Hanneke Farrand and Robert Gad.

As part of its international strategy, the firm advises Asian businesses on investing in Africa, as well as African companies investing in Asia. The firm is a board member of the global Taxand network, which encompasses more than 400 tax partners and 2,000 advisers in more than 50 countries.

EY offers the full range of tax services in South Africa, including tax accounting, cross-border transactions, compliance and business restructuring. Key partners at the firm include tax leaders Lucia Hlongwane and Mark Goulding. Before joining the firm, Hlongwane was at Barclays Africa Group, where she was the head of tax, having previously worked for Royal Dutch Shell. She has impressive expertise in M&A deals, divestments, litigation and lobbying.

Managing partner Blaize Vance heads the Africa tax practice at Fasken Martineau DuMoulin. He works closely with Conor McFadden and Paul Fouche in Johannesburg. The firm offers extensive advice and support in transfer pricing, international tax planning, dispute resolution and litigation, for such sectors as mining, renewable energy and finance.

Director Richard Glyn oversees the tax team at Glyn Marais. He founded the firm with fellow director Francois Marais, who specialises in corporate finance and commercial law. The tax practice offers a comprehensive range of services, advising corporate and international clients on issues like capital gains tax, cross-border transactions, structuring and VAT.

Glyn Marais has strong relationships with independent law firms in eight out of 15 member states of the Southern African Development Community. The firm's client base comprises financial institutions in areas such as debt capital markets, derivatives and structured finance.

Eugene du Plessis leads the Grant Thornton tax division in Johannesburg. The tax team offers advice on a number of tax activities for domestic and international clients, with a focus on such areas as compliance, corporate, VAT and indirect tax. The firm also offers advice on restructuring and private equity transactions, as well as tax investigations and reviews.

Active in 24 African countries spanning the continent, Grant Thornton goes back in South Africa 100 years. The firm works with clients from a number of sectors, including the mining industry, where Grant Thornton is particularly strong in terms of expertise. The tax practice has expanded significantly every year and, partly as a result of such growth, now offers advice to multinational corporations across Africa and worldwide.

The Johannesburg tax team at Hogan Lovells is headed by Ernie Lai King. He has 33 years of experience in the field. King's expertise ranges from M&A deals and cross-border transactions to dispute resolution. He was chairman of the South African Chamber of the Business Tax Committee and a board member of the South African Institute of Tax Practitioners.

As part of a firm of more than 130 lawyers, the tax practice offers a full suite of services and has a key strength in real estate. The team has expertise in tax disputes, structuring, transfer pricing issues, VAT and customs planning. Other distinguished partners at the firm include Natalie Napier and Jackie Peart.

Director Alan Field is the head of corporate tax at KPMG in South Africa. He works closely with Natasha Vaidanis, the head of international tax, who has overseen transfer pricing services for nearly a decade. Field has industry knowledge of finance, banking, insurance and private equity. Before joining the firm, Field was at Arthur Andersen.

Andrew Wellsted is the head of tax at Norton Rose Fulbright. His tax experience covers such areas as financial services, mining and renewable energy. Wellsted works closely with Dale Cridlan at the Johannesburg office. Cridlan liaises with the South African tax authorities and advises clients on tax disputes.

The tax team offers a wide variety of tax services including due diligence, corporate structuring, corporate M&A deals and other transactions. The firm's key focus areas cover estate planning, incentives, economic empowerment and carbon tax. The practice has a strong client base, including major companies like Rio Tinto and Anglo American.

David Lermer leads the South African tax group for PwC. He has more than 30 years of experience in the field, including expertise in transfer pricing, international tax, structuring and cross-border transactions. Lermer helped found Afritax, the PwC network of tax and exchange control specialists in sub-Saharan Africa.

The Cape Town-based tax team offers a wide range of services, covering such areas as corporate tax, business transformation, compliance, auditing and TP issues. The firm's client base includes multinational corporate groups and private pension schemes.

Director Brian Dennehy took over from Anne Bennett as the head of tax at Webber Wentzel in March 2017. Bennett remains the head of international tax and the TP team within the tax business unit. The tax group has 12 partners and 19 other tax professionals, with expertise spanning the whole of tax law.

The practice offers domestic and international clients advice in corporate tax, international tax, dispute resolution, M&A and other transactions. The team keeps track of international policy developments and regularly updates its clients on them. This remit extends to private equity funds, buy-outs, corporate restructuring, derivatives and economic empowerment.

Webber Wentzel belongs to the African Legal Network, a group of top tier law firms, and has offices in Johannesburg and Cape Town, with a total of 450 lawyers. The firm also has an alliance with Linklaters, which gives it greater access to markets in lusophone and francophone Africa.

As part of a firm of more than 180 lawyers, the tax team at Werksmans Attorneys offers an extensive range of tax advice and support. The practice's key focus areas are M&A deals, private equity, economic empowerment, incentives, estate planning and corporate reorganisations.

The tax practice is led by director Ernest Mazansky, who specialises in tax planning and restructuring for corporate entities. Mazansky works in tandem with the head of international tax, Michael Honiball, who advises corporates and wealthy individuals on tax planning. The team serves domestic and international clients on inbound and outbound investment, offshore structures and financing.